Education Savings Accounts (ESAs)

Start saving money to help a child, grandchild or any young person pay for education expenses.

Coverdell Education Savings Accounts (ESAs) are an ideal way to begin saving money to help a child, grandchild or any young person pay for education expenses.

ESA contributions are not tax-deductible, but they may earn interest tax-deferred until distributed. The child will not owe tax on any distribution from the account if it is equal to or less than the child’s qualified education expenses at an eligible educational institution for the year.

Amounts distributed from an ESA that exceed the child’s qualified education expenses may be subject to income tax and to an additional 10 percent penalty tax. If the child does not need the money for education expenses, the assets may be rolled over or transferred to a qualified family member’s ESA or to a qualified tuition program (QTP).

The maximum contribution limit per child is $2,000 each tax year. The deadline for making a 2017 contribution is April 17, 2018.

ESA Features

Qualified expenses for K-12 school costs
This includes home computer equipment, Internet access and tutoring.

Waiver of age limitations for children with special needs
The law allows contributions for individuals with special needs beyond age 18 and no mandatory pay-out at age 30.